Some adult children are forced to engage is prolonged legal battles after their parents passing over “reverse mortgages.” These mortgages are loans available to older homeowners. Essentially it allow the owners to withdraw money on their home in a lump sum or in monthly installments. For seniors who need immediate access to funds for emergency expenses, home care, or the like, the loan is tempting.
However, there are countless horror stories about unconscionable terms placed on the homeowner. Because the owners are usually seniors, there are many examples of elderly individuals who agree to the mortgage without truly appreciated what they are getting into. It is often up to adult children to work through the mess and fight for fairness after the fact.
For example, the Herald shared the on-going fight of one New York woman after her mother agreed to a downright “crazy” mortgage. As the story notes, the reverse mortgage in question had a base interest rate of 9.95%. On top of that the lender received a 50% share of any increase in the value of the home plus a 2% “maturity fee.” Even more there was a mandatory $33,000 annuity that needed be purchased by the homeowner with compounding interest on the balance. In other words, these are terms that most would be strongly advised against taking.
All told the adult daughter believes that the lender will be asking for upwards of $1.6 million on the reverse mortgage, even though the senior only received about $273,000 in the thirteen years from when she received the mortgage and her passing in 2010.
The senior was widowed and 78 years old when she obtained the loan from the company. Family members apparently did not know anything about the move. The article sums up the situation with a prudent reminder for all local families: “Reverse mortgages, even today’s friendlier versions that offer upfront counseling, can be hazardous to elderly borrowers’ financial health and potentially costly for their heirs.”
This is one of many reasons why it is critical for families to have discussions very early about assistance with financial matters. That need is even greater when one parent has passed away and the other is managing affairs on their own. With financial exploitation of the elderly occurring at such a high rate, it is wise for all families to seek out professional advice and put plans in place to protect assets and ensure loved ones are not taken advantage of in their golden years.